2005 (4) TMI 128 - AT - Central Excise

Tribunal overturns duty demand due to lack of mutuality.

The Tribunal allowed the appeal, setting aside the demand for duty and penalty. It found that there was no mutuality of interest between the appellant and ... SSI Exemption - Clubbing of clearances Issues:- Clubbing of clearances for levy of duty under Notification No. 175/86-C.E.- Allegation of financial flow-back and sharing of common facilities between units.- Validity of clubbing clearances based on mutuality of interest.- Compliance with show cause notice requirements.Analysis:The case involved the appellant, an SSI unit manufacturing spares for drilling rigs, facing a demand for duty amounting to Rs. 47,14,601/- for the periods 1986-87 and 1987-88. The dispute arose as the department alleged that the appellant had shown clearances in the name of dummy units, namely M/s. SVTS and M/s. SNI Agencies, to claim SSI exemption. The Commissioner of Central Excise clubbed the clearances of the appellant with SVTS, quantifying the duty at Rs. 7,20,379/- and imposing a penalty of Rs. 5,000/-, leading to the present appeal.Upon hearing both sides, the appellant contended that the reasons for clubbing clearances were beyond the scope of the show cause notice. The appellant and SVTS were independent units with separate facilities, and no financial flow-back or common facilities were alleged. The Commissioner's findings on financial flow-back and common facilities were considered beyond the show cause notice's scope. The appellant argued that the clearances should not be clubbed merely because SVTS was run by the wife of the appellant's proprietor.The Tribunal noted that the show cause notice did not specifically allege why the clearances were to be clubbed. The clubbing of clearances was found to lack mutuality of interest, a necessary condition. The Tribunal referenced previous findings that the units were separate entities with no evidence of being dummy units. No mutuality of interest was established between the appellant and SVTS. As the appellant's clearances did not exceed the exemption limit, no duty was leviable. Consequently, the demand for duty and penalty were set aside, and the appeal was allowed.In conclusion, the Tribunal's decision focused on the lack of valid grounds for clubbing clearances, absence of mutuality of interest, and non-compliance with show cause notice requirements. The judgment emphasized the importance of establishing valid reasons and meeting legal conditions when clubbing clearances for duty levy under relevant notifications.